Joint Membership Meeting
Microfinance: Hope for the Poor

24 February 2009 - At the joint meeting of the Makati Business Club and the Management Association of the Philippines held today at the Hotel InterContinental Manila, Washington SyCip urged businessmen to help the poor through microfinance. The event marked the third anniversary of the PinoyME Foundation, the social investment banking arm of the PinoyMe consortium. Former President Corazon Aquino spearheaded the formation of the foundation in 2006 to help microfinance institutions and microentrpreneurs gain access to funding and financial advice, as well as to support projects that will strengthen the microfinance industry.

Development from the Bottom
SyCip, a trustee of the PinoyME Foundation, pointed out that microfinance is the most important area in fighting poverty today. It is a new model of attacking poverty and pursuing development starting from the bottom.

Microfinance institutions typically lend poor borrowers P5,000 to as much as P100,000. The rate of interest is only 30%, compared to 36% for those borrowing through credit cards. The repayment rate is surprisingly high at 95% to 98%.

Nevertheless, despite the existence of some 500 microfinance institutions in the country as of end-2007, poor Filipinos’ access to microcredit remains inadequate. The gap is filled by informal credit services, such as those offered by an estimated 25,000 Indian nationals, some of whom charge an interest rate of as much as 1,000% per year. Because those who offer such informal credit services do not pay income taxes, SyCip believes the government should go after them.

Prioritize Fight Against Poverty
SyCip lamented that the Philippines has already been overtaken by its Asian neighbors in the fight against poverty, citing China and Vietnam’s success in poverty reduction. He believes that the Philippines should be looking into what its neighbors are doing to fight poverty. He also proposed that part of the wealth of Makati be devoted to fund an independent study, led by the University of the Philippines and involving economists, political scientists, and teachers in the countryside, to find out why the country has failed to make any headway in the war against poverty from the point of view of the low-income classes and nonpoliticians.

At a time of rising unemployment in export industries, SyCip pointed out that rapid reduction in poverty incidence should be a top priority. He noted the importance of national unity, especially in times of economic hardship, and hoped that the poor will benefit from the government’s economic stimulus package, which should be implemented with transparency and free from political influence.

ABOUT THE SPEAKER

Washington Z. SyCip
Mr. Sycip, the founder of the SGV Group, is chairman emeritus of the board of trustees and board of governors of the Asian Institute of Management, as well as a member of the board of trustees of the Ramon Magsaysay Foundation and an honorary life trustee of the Asia Society. He is a member of the international advisory boards of the Eisenhower Exchange Fellowships and the Council on Foreign Relations in New York. He also sits in the board of directors of a number of major corporations in the Philippines and other parts of the world. He holds two master of science degrees in commerce from the University of Santo Tomas and from Columbia University.